On Feb. 22, 2010, the SEC adopted amendments (Release No. 33-9108) to the rules relating to the Internet availability of proxy materials in order to improve the notice and access model for furnishing proxy materials to shareholders.
The SEC’s intent is to clarify and provide additional flexibility regarding the format of the Notice of Internet Availability (Notice) and to permit companies and other soliciting shareholders to better communicate with shareholders by including explanatory materials. The rules also revise the time frame for delivering a Notice to shareholders when a soliciting shareholder relies on the notice-only option.
The final e-proxy rules generally track the rules as originally proposed by the SEC in October 2009 (previously discussed in our Oct. 20, 2009 legal update). The final rules will be effective Mar. 29, 2010, and therefore will have a more significant impact on the 2011 proxy season.
Content and Form of Notice
The final rules adopt the amendments as proposed and provide that the Notice address certain topics, but they no longer require that specific language be used. These topics include an indication that the communication presents only an overview of the more complete proxy materials, the website address and instructions regarding how a shareholder may request a paper or e-mail copy of the proxy materials. In addition, the final rules require a company and soliciting shareholder to indicate that the Notice is not a form for voting.
Accompanying Materials
The final rules track the proposed rule language, and permit companies and other soliciting shareholders to accompany the Notice with an explanation of the process of receiving and reviewing proxy materials and voting under the e-proxy rules. The final rules also permit companies and soliciting shareholders to include an explanation of the reasons for using e-proxy rules. Materials designed to persuade shareholders to vote in a particular manner or change the method of the delivery of proxy materials are still not permitted.
Notice Deadlines for Soliciting Shareholders
The final rules adopted the proposed rules and amend the notice deadlines for soliciting shareholders. If soliciting shareholders choose to use the notice-only option, they are allowed to file a preliminary proxy statement within 10 days after a public company files a definitive proxy statement, and to send their Notice to shareholders no later than the date on which the soliciting shareholders file their definitive proxy statement with the SEC.
Guidance
In the adopting release, the SEC confirmed the guidance it provided in the proposing release that it is not necessary that the Notice directly mirror the proxy card. Rather, the Notice must clearly and impartially identify each separate matter intended to be acted on that will be considered at the meeting. Also, the Notice does not have to conform to the specific formatting and content requirements for disclosure of matters on the proxy card.
Continued Review
In the proposing release, the SEC sought comments on specific issues not covered in the proposed rules, including whether to reduce the amount of time required for sending the Notice prior to the meeting from 40 days to 30 days. At this time, the SEC is not addressing this issue or others, but is still considering ways to further encourage informed shareholder participation. The SEC staff is conducting a comprehensive review of the mechanics by which proxies are voted and the way in which information is conveyed to shareholders.
McGuireWoods LLP assists clients in complying with their corporate governance and public reporting obligations, and we actively monitor developments in these areas. We are ready to assist you in preparing to respond to any changes.